Corporation Tax: Associated Companies

The corporation tax rate is currently set at 19%, regardless of the amount of taxable profits. However historically the corporation tax rate was set at different rates according to profit and so the question of associated companies would affect the amount of corporation tax payable.

Corporation Tax Rates and Thresholds

The corporation tax rates change year to year, but the threshold of £300,000 where the rate changes has been the same for several years now.

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018

Corporation tax rate for profits below £300,000 threshold

20%

20%

20%

20%

19%

Corporation tax rate for profits over £300,000 threshold

23%

21%

20%

20%

19%

The years above relate to tax years, which run from 6 April to 5 April.

What are Associated Companies for Corporation Tax?

One company is associated with another if either:

one company controls the other

both companies are controlled by the same companies or people

So, for example if a person owns two limited companies, regardless of their trade, they are associated for corporation tax purposes.

What is the Affect on Corporation Tax of being an Associated Company?

All the associated companies will have a shared tax threshold, currently £300,000. For example, if one company owns 3 others, divide the threshold by 4. The small profits threshold is then £75,000 for each company.

In tax year 2014/2015 this would mean that for each Company whose profits exceed £75,000, that Company would need to pay corporation tax at a rate of 21% rather than 20%. However if the Companies were not associated each would be able to make profits up to £300,000 before needing to pay corporation tax at 21%.

Anita is a Chartered Accountant with over 10 years experience in accounting, tax and operations for Small Businesses. She is experienced across a diverse spectrum of businesses meaning the advice she provides is practical as well as technical.